Citizens Advice response to the Work and Pensions Select Committee inquiry into childcare costs under Universal Credit

25 October 2018

Citizens Advice has helped nearly 1,400 people with issues relating to childcare costs within Universal Credit in the 12 months up to the end of August 2018.

Our consultation response [ 140 kb] highlights evidence from across our service which suggests there are a number of implementation issues with the provision of support for childcare costs through this system, as well as some key challenges for claimants deriving from the design of Universal Credit.

Nearly 500,000 low income families will rely on Universal Credit to pay their childcare bills once the managed migration of current Tax Credits claimants is complete. 95% of the additional 113 million hours of work promised in the Universal Credit business case will be carried out by people who have caring responsibilities for children, with 78 million of these hours attributed to lone mothers.

The economic activity of parents is closely tied to the fixed costs of work, and most claimants will need to weigh the benefits of any additional hours of work against the cost and logistics of increased use of childcare. If Universal Credit is to fulfill its aim of supporting more people to begin work, and increasing their hours and earnings, it is vital that its systems support parents to find and sustain appropriate childcare.

We make three specific recommendations to the DWP which we believe will help to achieve this aim. The Department should:

explore options to remove the barrier of the upfront cost of childcare for low-income parents. The move from payment in advance, which existed within Working Tax Credits, to a system of reimbursing costs creates a barrier to work and means some parents are left facing significant financial challenges as they struggle to bridge the gap. We believe the Government should consider the recommendations made by the Treasury Select Committee in 2018 to explore paying the childcare element of Universal Credit directly to providers, or else to pay parents in advance.

develop a centralised system to help claimants evidence their childcare costs, building on the initial success of the Landlord Portal. This could form part of the Government’s online childcare service and allow large providers to verify costs and childcare placements without the need for additional claimant evidence.

explore the options for allowing people greater flexibility around assessment periods. This could include the ability to set the timing of these so that they make income more stable and budgeting easier - particularly for people in insecure work - and options for those whose working and wage patterns do not fit neatly into a monthly cycle of assessment periods.